If The London Property Market Is Creaking, Does It Make Sense To Start Looking Overseas?

Ever since Britain joined the European Union in 1973, property in London has represented about as sound an investment as anybody could hope for. But now that Britain is set to cut ties with the EU, is the city’s property market about to suffer a correction, and is it worth looking at alternative options?

Data from Nationwide suggests that London house prices have grown by 36x; from just under £13,000, to more than £474,000 in the period that Britain has been an EU member. In general, the ride has been a smooth one too, barring the occasional international incident. Black Wednesday, in 1992, when England dropped out of the European Exchange Rate Mechanism with disastrous consequences for the value of the pound; the global stock market collapse of 2009, which saw house prices drop by 20% (although, after bottoming out, prices soon doubled), and Brexit itself, which has left us all wondering what is in store for London property?

On the one hand, the devaluation of the pound post-Brexit makes property in London more attractive to the overseas buyer. On the other, prices are so inflated that the vast majority of buyers, overseas or domestic, are struggling to climb onto London’s precarious property ladder at all.

When it comes to “prime” central London properties, more than half of buyers come from overseas, research shows. These buyers may feel like they are getting a bargain, as well as an opportunity to embrace British culture, but will they be as enthusiastic if the British economy stutters after Brexit, their properties are devalued, and there are no longer any prospective buyers in the marketplace?

London also has a responsibility towards its local, and younger residents. The city has introduced help-to-buy schemes and tried to discourage strategic overseas investment where the buyer purchases the property and leaves it empty, interested only in the resale value. But despite these initiatives, it is still taking young people an average of 19 years to save for a deposit, according to some sources, when 3 years used to be more standard.

London’s powers-that-be are committed to building more affordable houses, but from a political perspective, successive governments have promised much in that regard and failed to deliver, perhaps wary of a backlash from existing homeowners whose property values suffer as a result of new housing.

One radical solution that many London property owners, or renters, foreign or domestic, might want to consider is buying “overseas” themselves.

Many people in the UK are concerned about losing their EU citizenship, which means no longer being entitled to travel freely in the Schenzen Zone, struggling to obtain work permits overseas, and holding all of their assets in a currency that is in danger of becoming seriously undervalued.

Rather than attempting to save the £50k plus deposit they might need for a London home, home ownership overseas may offer more flexibility, affordability, and altogether much more bang for their buck.

Overseas mortgage lenders often try to lure overseas buyers and indeed the path is a well trodden one. There are millions of Brits living overseas, and with today’s more flexible work environment, it is perfectly possible to work for a British company from overseas, or find freelance work or a further a career in a foreign country.

The opportunity to become an EU resident again also holds considerable appeal. France and Spain, 2 of the 3 most visited countries in the world, are easy to reach and with the rise of budget airlines, returning home for a spell to see family and friends overseas has never been easier.

Buying overseas property may be an excellent investment opportunity, too. According to Alexander Vaughan of Spanish property investment company Lucas Fox.

“The London market has become relatively deflated post Brexit but the Spanish property recovery is now well underway. The Spanish Land Registrars Association recently showed that prices increased by 9.39% in the first quarter of 2018 while the official Government index shows valuations up 2.7%.”

Cities like Madrid are becoming property investment hubs; according to Vaughan, “average property prices in Madrid city showed an annual increase of 21% at the end of the first quarter of 2018”. Buy now before it is too late, in other words.

If you are a millennial struggling to get on the property ladder in London, you might well want to ask yourself, what is it exactly that I am saving for? If it is a home sweet home that comes with all the advantages of city-living; culture, good employment opportunities, schools, security and diversity; there is certainly no need to narrow your search to London, or even the UK.

The possibilities are many, and from an administrative perspective, it is probably not nearly as complicated as you think.

Stay tuned for more details on how to buy abroad, whilst keeping hold of your job prospects, lifestyle and family and friends.

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